Non-Individual Taxation

1. Corporations
2. Co-ownership
3. Estates and Trusts
4. Partnerships
CORPORATE TAXATION
Regular Corporate Income Tax Formula

Gross Income XX
Less: Allowable Deductions (XX)
Net Taxable Income XX
x 30%
Income Tax Payable XX
Corporations include the following:

1. Partnerships, no matter how created or organized

But excluding the following partnerships

A. General Professional Partnership

GPP Not subject to Income Tax

Partner A Partner B

*However the Income of the GPP that is distributed to the partners

will form part of their taxable income
Joint Ventures or Consortium
A commercial undertaking by two or more persons differing from a partnership
in that it relates to the disposition of a single lot of goods or the completion of a
single product

General Rule= Taxable as a Corporation

Exception

1. JV or Consortium for Construction projects

2. JV or consortium engage in energy operations pursuant to an agreement under a

service contract with the Government
Taxation of Co-Venturer’s share in the Profit of the Joint Venture
Joint Venture Co-Venturer

Individuals Corporations

Taxable Joint Venture Final Withholding Tax Exempt*

30% Regular Corporate Income

Non-Taxable Joint Venture Regular Income Tax Tax

*Intercompany Dividends are exempt from Income tax

ABC Co. and DEF Co. formed a Joint Venture. They agreed to share profit or loss in the ratio
of 70% and 30% respectively. The results of the operations are:

Joint Venture ABC. Co. DEF Co.

Gross Income 5,000,000 3,000,000 2,000,000
OPEX 3,000,000 2,000,000 1,500,000

1. The income tax payable of the joint Venture is?

Gross Income 5,000,000

- OPEX (3,000,000)
Net T.I. 2,000,000
X 30%
Income Tax payable 600,000
ABC Co. and DEF Co. formed a Joint Venture. They agreed to share profit or loss in the ratio
of 70% and 30% respectively. The results of the operations are:

Joint Venture ABC. Co. DEF Co.

Gross Income 5,000,000 3,000,000 2,000,000
OPEX 3,000,000 2,000,000 1,500,000

1. The income tax payable of the ABC Co?

Gross Income 3,000,000

- OPEX (2,000,000)
Net T.I. 1,000,000
X 30%
Income Tax payable 300,000
ABC Co. and DEF Co. formed a Joint Venture. They agreed to share profit or loss in the ratio
of 70% and 30% respectively. The results of the operations are:

Joint Venture ABC. Co. DEF Co.

Gross Income 5,000,000 3,000,000 2,000,000
OPEX 3,000,000 2,000,000 1,500,000

1. Assume the JV is a tax-exempt JV, the Income tax payable is?

Income Tax payable 0

JV is tax-exempt
ABC Co. and DEF Co. formed a Joint Venture. They agreed to share profit or loss in the ratio
of 70% and 30% respectively. The results of the operations are:

Joint Venture ABC. Co. DEF Co.

Gross Income 5,000,000 3,000,000 2,000,000
OPEX 3,000,000 2,000,000 1,500,000

1. Assume the JV is a tax-exempt JV, how much is total income tax due by ABC Co.
Gross Income 3,000,000
Share in JV’s Profit 1,400,000 (2,000,000x70%)
- OPEX (2,000,000)
Net T.I. 2,400,000
X 30%
Income Tax payable 720,000
 Classification of Taxpayers:
By Individual
1. Resident Citizen
2. Nonresident Citizen
3. Resident Alien
4. Non-Resident Alien

Corporate Taxation Classification

1. Domestic Corporation
2. Resident Foreign Corporation
3. Nonresident Foreign Corporation
1st Question

TRUE OR FALSE

The term “domestic” when applied to a corporation

means created or organized in the Philippines or
under the Laws of a Foreign Country as long as it
maintains a Philippine Branch.

Answer= False
A Domestic Corporation may only be formed under Philippine
Laws
2nd Question

TRUE OR FALSE

A corporation which is not domestic may be a

resident(engaged in business in the PH) or
Nonresident Corporation.

Answer= True
 Further Classification of Corporations

3rd question corporations subject to the Regular Income Tax rate.

1. Ordinary Corporations-

How much is the Regular Corporate Income Tax rate in the Philippines?

a. 32%
b. 30%
c. 35%

Trivia:
From 2000 to 2005 it was 32%
From 2005 to 2008 it was 35%
And it was amended on 2009 to 30% up to the present date.
 Further Classification of Corporations

1. Ordinary Corporations- corporations subject to the Regular

Corporate Income Tax rate.

2. Special Corporations- corporations subject to income tax which is

lower than the regular income tax rate of 30%
Domestic
a. Proprietary educational institutions
b. Non-profit hospitals

Resident Foreign
a. International Carriers
b. Regional Operating Headquarters

Nonresident Foreign
Non-resident Cinematographic film owner, lessor or distributor
non-resident owner or lessor of vessels charted by Philippine nationals
non-resident owner or lessor of Aircraft, machineries and other equipment
Exempt Organizations

1. Labor, Agricultural or horticultural orgs not organized principally for profit

2. Mutual savings bank not having capital stocks and Cooperative banks without capital stock
and operated for mutual purpose and without profit
3. A beneficiary society, order or association operating for the exclusive benefit of the
members. (Ex. Fraternal organizations.)
4.Cemetary company operating for the benefit of its members.
5. Non-stock corporation organized and operated exclusively for religious, charitable, scientific,
athletic or cultural purposes or for rehabilitation of veterans, no part of its income or asset shall
belong to the benefit of its members, organizers, officers or any specific person.
6. Business league, chamber of commerce or board of trade not organized for profit.

7. Civic league or organization not organized for profit.

8. A non-stock and nonprofit educational institution

9. Government educational institution

10. Farmers or other mutual typhoon or fire insurance company, mutual ditch or irrigation
company, mutual or cooperative telephone company, or the like organization where fees
collected are solely for the purpose of meeting expenses.

11. Farmers or like associations organized as sales agent for the purpose of marketing the
product of its members
Government-owned or controlled Corporations
All corporations, agencies or instrumentalities owned or controlled by the government shall be taxable like
“Ordinary Corporations”. However the following shall be exempt:

1. Government Service and Insurance System

2. Social Security System
3. Philippine Health Insurance Corporation
4. Local Water Districts
4th Question

One of the following is not exempt from income tax

A. SSS and GSIS

B. Philippine Health Insurance Corporation
C. Local Water Districts
D. Philippine Charity Sweeptakes Office

Answer= D
PCSO is already taxable upon the effectivity of the Train Law
Basis of Income subject to Tax

1. Domestic Corporations, Resident Foreign Corps.

= Net Income

2. Non-Resident Foreign Corps.

= Gross Income

Gross Income XX
Allowed Deductions (XX)
Net Taxable Income XX
5th Question

TRUE OR FALSE

A resident foreign corporation are subject to

income tax based on net income from sources
within and outside the Philippines

Answer= False
Only income from within the Philippines
Regular Corporate Income Tax Formula

Gross Income XX
Less: Allowable Deductions (XX)
Net Taxable Income XX
x 30%
Income Tax Payable XX

General Allowed Deductions:

1. Business Expenses and Losses (Itemized Deductions
2. Optional Standard Deduction
6th Question
Computation

A corporation in 2019 had collected in revenues a total of

PHP12,500,000. Their Direct cost of services was 3,000,000, other
business related expenses of the corporation totaled to 2,000,000.
The president of the company had 1,500,000 in personal expenses.

Compute for the Regular Income Tax.

Answer=
12,500,000-3,000,000-2,000,000= 7,500,000 x 30%
= 2,250,000
 MINIMUM CORPORATE INCOME TAX

A 2% tax of the gross income as of the end of the taxable year.

Gross Revenue XX
Less: Direct Expenses (XX)
Gross Income XX
Less: Other Expenses XX
Taxable Income XX

•MCIT is imposed on Domestic Corporations and Resident Foreign Corporations which are
subject to Regular Income Tax rate

•Beginning on the 4th taxable year immediately following the taxable year in which such corporation
commenced its business operations.
 THE MCIT Shall be Imposed whenever:

1. The corporation has zero taxable income

2. The corporation has negative taxable income

3. Whenever the amount of MCIT is greater than the regular corporate income tax due as computed.
7th Question

A corporation was registered with the BIR in 2009. What year would be
the first MCIT will be imposed on such corporation

Answer: 2013
8th Question

The MCIT shall apply to which of the following corporations?

I. International Carrier
II. Regional Operating Headquarters
III. Non-profit Hospitals

a. I only c. I, II and III

b. II only d. None of the above

Answer: D. None of the above

I,II and III are special corporations not subject to the RCIT.
9th Question

The MCIT does not apply to a corporation, if:

a. Imposition was suspended by the Secretary of Finance due to a corporation's heavy losses arising from
prolonged labor dispute.
b. Corporation is in its initial year of operation
c. Corporation is exempt from income tax by virtue of tax holidays granted to it by the Board of Investment

d. All of the above

Answer= D
Secretary of Finance
Carlos Dominguez III
Relief from MCIT
A company can be exempt from MCIT if they are
suffering from:
a. Prolonged Labor Dispute
b. Force majeure problems
c. Legitimate Business Reverses
11th Question
Computation

ABC corporation registered with the BIR on 2013, had the following data for the
taxable year 2019:

Gross Revenue 5,000,000

Direct Expenses 3,500,000
Other Related Expenses 1,000,000

How much is the Income tax Due from the corporation?

Answer=
RCIT 5,000,000-3,500,000-1,000,000= 500,000 X 30% Income tax Payable=
= 150,000 RCIT= 150,000
MCIT= 5,000,000-3,500,000= 1,500,000 x 2%=
30,000
12th Question
Computation

DEF corporation registered with the BIR on 2013, had the following data
for the taxable year 2019:

Gross Revenue 5,000,000

Direct Expenses 3,500,000
Other Related Expenses 2,000,000

How much is the Income tax Due from the corporation?

Answer=
RCIT= 5,000,000-3,500,000-2,000,000= -500,000 Income Tax Due
MCIT=5,000,000-3,500,000= 1,500,000 x 2%=30,000 MCIT= 30,000
12th Question
Computation

GHI corporation registered with the BIR on 2017, had the following data for the taxable
year 2019:

Gross Revenue 5,000,000

Direct Expenses 2,500,000
Other Related Expenses 2,700,000

How much is the Income tax Due from the corporation?

Answer= 0
The Corporation was established on 2017, and it is
still not subject to MCIT.
 13th question
Computation

JKL Co. registered with BIR in 2012, had the following data for the year 2019:
Gross Receipts 1,150,000
Discount and allowances 250,000
Salaries of personnel directly involved in rendering services 300,000
Salaries of administrative personnel 100,000
Fees of consultants directly involved in rendering services 50,000
Rental equipment used in rendering services 70,000
Rental of office space for use of administrative personnel 50,000
Other operating expenses 420,000

Compute for the Income Tax Payable?

Answer=
Gross Receipts 1,150,000
Less: Direct Cost of services
Discount and allowances - 250,000
Salaries of personnel directly involved in rendering services - 300,000
Fees of consultants directly involved in rendering services - 50,000
Rental equipment used in rendering services - 70,000
GROSS INCOME 480,000
Less: Other Expenses
Salaries of administrative personnel -100,000
Rental of office space for use of administrative personnel - 50,000
Other operating expenses - 420,000
Taxable Net Income(Loss) (90,000)
Regular Income Tax Rate= 0

Minimum Corporate Income Tax Rate=

480,000 x 2% = 9,600
Carry Forward of Excess MCIT

Any excess of the MCIT over RCIT shall be carried forward and credited
against the RCIT for the three immediately succeeding taxable years.
Answer=
Gross Receipts 1,150,000
Less: Direct Cost of services
Discount and allowances - 250,000
Salaries of personnel directly involved in rendering services - 300,000
Fees of consultants directly involved in rendering services - 50,000
Rental equipment used in rendering services - 70,000
GROSS INCOME 480,000

Minimum Corporate Income Tax Rate=

480,000 x 2% = 9,600

RCIT= 0
MCIT= 9,600

If in the next year JKL Co. will have a Regular Corporate Income Tax of
100,000 the previous year MCIT will be deducted and JKL. Co will only
have to pay 90,400.
Net Operating Loss Carry Over
When a Corporation incurs a Negative Taxable net income or a net
operating loss, this loss can be deducted from the gross income for
the next three succeeding years.
Answer=
Gross Receipts 1,150,000
Less: Direct Cost of services
Discount and allowances - 250,000
Salaries of personnel directly involved in rendering services - 300,000
Fees of consultants directly involved in rendering services - 50,000
Rental equipment used in rendering services - 70,000
GROSS INCOME 480,000
Less: Other Expenses
Salaries of administrative personnel -100,000
Rental of office space for use of administrative personnel - 50,000
Other operating expenses - 420,000
Taxable Net Income(Loss) (90,000)

The Net Loss of 90,000 will be deducted from the Gross Income of the
following year if the Company has a positive Net Income
14th Question
Computation

NDC, Corp, a domestic corporation had the following selected data:

YEAR GROSS INCOME EXPENSES
2014 1,000,000 1,200,000
2015 2,000,000 1,900,000
2016 3,000,000 2,950,000
2017 1,000,000 1,100,000
2018 980,000 500,000

The Taxable Income for 2015 was:

Answer:
2014 2015
Gross Income 1,000,000 2,000,000
Expenses -1,200,000 -1,900,000
Net Income(Loss) (200,000)
NOLCO
2014 -100,000
Taxable Income 0 0
16th Question
Computation

NDC, Corp, a domestic corporation had the following selected data:

YEAR GROSS INCOME EXPENSES
2014 1,000,000 1,200,000
2015 2,000,000 1,900,000
2016 3,000,000 2,950,000
2017 1,000,000 1,100,000
2018 980,000 500,000

The Taxable Income for 2016 was:

Answer:
2014 2015 2016
Gross Income 1,000,000 2,000,000 3,000,000
Expenses -1,200,000 -1,900,000 -2,950,000
Net Income(Loss) (200,000) 100,000 50,000
NOLCO
2014 -100,000 -50,000
Taxable Income 0 0 0
15th Question
Computation

NDC, Corp, a domestic corporation had the following selected data:

YEAR GROSS INCOME EXPENSES
2014 1,000,000 1,200,000
2015 2,000,000 1,900,000
2016 3,000,000 2,950,000
2017 1,000,000 1,100,000
2018 980,000 500,000

The Taxable Income for 2017 was:

Answer:
2014 2015 2016 2017
Gross Income 1,000,000 2,000,000 3,000,000 1,000,000
Expenses -1,200,000 -1,900,000 -2,950,000 -1,100,000
Net Income(Loss) (200,000) 100,000 50,000 (100,000)
NOLCO
2014 -100,000 -50,000 0
Income(Loss) (200,000) 0 0 0
15th Question
Computation

NDC, Corp, a domestic corporation had the following selected data:

YEAR GROSS INCOME EXPENSES
2014 1,000,000 1,200,000
2015 2,000,000 1,900,000
2016 3,000,000 2,950,000
2017 1,000,000 1,100,000
2018 980,000 500,000

The Taxable Income for 2018 was:

Answer:
2014 2015 2016 2017 2018
Gross Income 1,000,000 2,000,000 3,000,000 1,000,000 980,000
Expenses -1,200,000 -1,900,000 -2,950,000 -1,100,000 -500,000
Net Income(Loss) (200,000) 100,000 50,000 (100,000 ) 480,000
NOLCO
2014 -100,000 -50,000 0
2017 -100,000
Income(Loss) (200,000) 0 0 (100,000) 380,000
Eligen’s Macho Dancers Corporation had the following results of operations
for the years
2016 2017 2018 2019
Gross Revenue 5,000,000 6,000,000 4,000,000 7,000,000
Direct Expenses 3,000,000 2,200,000 2,000,000 1,500,000
Other/Business Expenses 2,500,000 2,000,000 2,500,000 2,000,000
Compute for the Income Tax payable each year
Solution
2016 2017 2018 2019
Gross Income 2,000,000 3,800,000 2,000,000 5,500,000

Net Income (Loss) (500,000) 1,800,000 (500,000) 3,500,000

Net Carry Loss Over (NOLCO) 0 (500,000) 0 (500,000)
Net Taxable Income 0 1,300,000 0 3,000,000
RCIT 0 390,000 0 900,000
MCIT 40,000 76,000 40,000 110,000
MCIT carry over 0 (40,000) 0
Income Tax Payable 40,000 350,000 40,000 2018 (40,000) [40k-0]
860,000
PASSIVE INCOME OF CORPORATIONS

1. Final Withholding tax

16th question
True or False

Passive income are subject to separate and final tax rates

Answer: True
17th question
True or False

Passive income are included in the computation of taxable

net income from business operations of a corporation

Answer: False
 Capital Gains Tax

1. The land or building must be a capital asset

2. It must be located in the Philippines

FORMULA
Tax Base XX
Rate 6%
CGT XX

Tax Base:
1. Selling Price
2. Fair market value
3. Zonal Value
Whichever is highest among the three
18th question
True or False

Gain on sale of all kinds of capital assets are subject to

the Capital Gains Tax

Answer: False
Only Land and Building
19th question
True or False

Gain on sale of real property classified as capital asset

and located in Miami, Florida is not subject to Capital
Gains tax.

Answer: True
 20th Question
Computation

Kris. Inc. sold its vacant lot to Moca Corporation for 10,000,000 which it
acquired at a cost of 5,000,000. The fair market value of the said property
per tax declaration is 12,000,000 while its Zonal value is 15,000,000. How
much is the income tax applicable on the transaction?

Answer:
15,000,000 X 6% = 900,000
21st question
Multiple Choice

If the property is located abroad, what type of income tax will

apply to the transaction

a. Basic Income Tax

b. Capital Gains Tax
c. Both a and b
d. Neither a and b

Answer: A
Foreign Income Tax
Can be claimed as:
1. Deductible Expense
2. Tax Credit

TAX CREDIT
A tax credit is given to taxpayers who already paid taxes abroad on their income
from abroad. They are given deductions on their income tax due

Who can claim tax credit?

1. Resident Citizens
2. Domestic Corporations
Computing for the Tax Credit

Amount deductible is:

The lower between the Actual Paid abroad vs the Limit
LIMIT: If only one foreign country is involved:
(Net Income, Foreign/ Net Income, World) x Philippine Income Tax Due

If more than one foreign country, the limit is between the both:

Limit 1= (Net Income, per foreign country/ Net Income, World) x Philippine Income Tax Due

Limit 2= (Net Income, all foreign country/ Net Income, World) x Philippine Income Tax Due
Tax credit with one foreign Country
A domestic corp had the following data:
Taxable Income from the Philippines 1,800,000
Taxable Income from Japan 1,200,000
Income tax paid in Japan 300,000

Compute for the income tax payable

Method 1:Claimed as deductible expense

Total Taxable Income 3,000,000

Less: Tax paid abroad (300,000)
Net taxable income 2,700,000
x 30%
Income Tax Payable 810,000
Tax credit with one foreign Country
A domestic corp had the following data:
Taxable Income from the Philippines 1,800,000
Taxable Income from Japan 1,200,000
Income tax paid in Japan 300,000

Compute for the income tax payable

Method 2: Claimed as Tax Credit Computation for Tax Credit
Total Taxable Income 3,000,000 Actual foreign tax paid 300,000
X 30% Limit:
Income Tax before tax credit 900,000 1,200,000/3,000,000 X 900,000 360,000
Less: Tax Credit 300,000
Income Tax Payable 600,000 Foreign Tax Credit- LOWER 300,000
 Tax credit with more than one foreign Country
A domestic corp had the following data:
Taxable Income from the Philippines 1,800,000
Taxable Income from Japan 1,200,000
Taxable Income from Taiwan 1,000,000
Income tax paid in Japan 400,000
Income tax paid in Taiwan 200,000

Compute for the income tax payable Computation for Tax Credit
Limit 1( per country)
Total Taxable Income 4,000,000
X 30% Japan= Actual paid 400,000
Limit: (1.2M/4M x 1.2M) 360,000
Income Tax before tax credit 1,200,000 Lower amount 360,000
Less: Tax Credit 560,000 Taiwan= Actual paid 200,000
Income Tax Due 640,000 Limit: (1 M/4M x 1.2M) 300,000
Lower amount 200,000

Total for Limit 1= 360,000+200,000= 560,000

Limit 2(World Limit)
(1.2M+1.0M)/4 M x 1.2M = 660,000
Tax Credit- Lower between the 2 Limits
Tax Credit = 560,000
End of Regular Corporate Income Tax